Buying a House:The Decision-Making Process

Team 2:Bindu ChilkaHashir K KidwaiMubarak AlkhailiSaad A SiddiquiScott Leavengood

EMGT 530/630 Decision Making in Engineering & Technology Management

Spring Term, 2002

Outline

• Introduction• Methodology• Assumptions• Results & Discussion• Recommendations• Conclusions

Introduction

• Home-buying process– Largest & longest-term purchase many will make– Numerous steps, forms to fill-out, legal ramifications– Numerous factors to consider (tangible & emotional)– Conflicting criteria (e.g., price vs. location)– Often multiple decision makers (with differing

priorities)

Methodology

• Use structured decision approach (AHP)1. Specify primary criteria2. Weight criteria via pairwise comparisons3. Select candidate homes4. Rank candidate homes

Methodology

• Method conducted twice:– “Test run” - buyers that have purchased homes– “Sample Couple” – buyers currently in the

market for a home

Assumptions

• Finances already considered• Criteria grouping reasonable/ preferentially

independent criteria correctly identified– E.g., “Location” includes city, neighborhood,

schools

• “Virtual” home visits

Results – Couple 1

• Five criteria– Price– Location– Floor plan– Square footage– Quality of construction/ Condition of home

Results – Couple 1

Price 40Square Footage 60

Floor Plan 50Location 70

Price 70Location 60

Price 40Location 70

Floor Plan 20Square Footage 30

Location 60Floor Plan 40Price 50Square Footage 30Square Footage 30Floor Plan 40Quality of Const. 60Quality of Const. 30Quality of Const. 80Quality of Const. 70

Results – Couple 1

• Priority Weights– Price = 0.18– Location = 0.31– Floor plan = 0.12– Square footage = 0.12– Quality of const. = 0.27

• Inconsistency = 0.11 – Too high?

Results – Couple 1

• Priority Weights – “Team”– Price = 0.18– Location = 0.31– Floor plan = 0.12– Square footage = 0.12– Quality of const. = 0.27

• Inconsistency = 0.11

• Priority Weights – “Individual”– Price = 0.19– Location = 0.34– Floor plan = 0.11– Square footage = 0.10– Quality of const. = 0.26

• Inconsistency = 0.10

Results – Couple 1

Calculations:

[WP, WL, WF, WS, WQ] X

Weights Alternatives

AP1 AP2 … AP5

AL1 AL2 … AL5

AQ1 AQ2 … AQ5

.

.

.

= V1 V2 … V5

Portland, Aloha, … Beaverton

Results – Couple 1

Results – Couple 1

• Couple felt results agreed well with their perceptions – with the exception of the Tigard home (0.11), all homes were about equal (0.20-0.24), though they leaned towards the Portland home

Results – Couple 2

• Five criteria– Price– Location– Floor plan– Square footage– Year built

Results – Couple 2

• Priority Weights– Price = 0.30– Location = 0.12– Floor plan = 0.21– Square footage = 0.28– Year built = 0.09

• Inconsistency = 0.03

Results – Couple 2

Couple 1 • Priority Weights

– Price = 0.18– Location = 0.31– Floor plan = 0.12– Square footage = 0.12– Quality of const. = 0.27

• Inconsistency = 0.11

Couple 2 • Priority Weights

– Price = 0.30– Location = 0.12– Floor plan = 0.21– Square footage = 0.28– Year built = 0.09

• Inconsistency = 0.03

Results – Couple 2

Results – Couple 2

• Couple also satisfied with results – Home 5 was their clear favorite

• Couple is planning to visit the 5 homes

Recommendations

• Couple 2 to visit 5 homes and perform pairwise comparison on homes again

• Consider more than 5 criteria; eliminate very low value criteria

• Consider more than 5 homes; visit only top 3-5• Make purchase offers following home ranking

(offer on #1, counter-offer, etc. then go to home #2)

Conclusions

• Process as important as outcome– Less time spent visiting non-viable homes– Better understanding of partner’s priorities (or

realtor understands you better)– More confidence in decision

Questions?